House Hearing, 112TH Congress - Healthcare Realignment and Regulation: The Demise of Small and Solo Practices?

HEALTHCARE REALIGNMENT AND REGULATION:
THE DEMISE OF SMALL AND SOLO PRACTICES?
HEARING
BEFORE THE
SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT,

AND REGULATION
COMMITTEE ON SMALL BUSINESS

UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
HEARING HELD
JULY 19, 2012
Small Business Committee Document Number 112080

Available via the GPO Website: www.fdsys.gov
U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON
2012
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Internet: bookstore.gpo.gov Phone: toll free (866) 5121800; DC area (202) 5121800
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HOUSE COMMITTEE ON SMALL BUSINESS

SAM GRAVES, Missouri, Chairman
ROSCOE BARTLETT, Maryland
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JEFF LANDRY, Louisiana
JAIME HERRERA BEUTLER, Washington
ALLEN WEST, Florida
RENEE ELLMERS, North Carolina
JOE WALSH, Illinois
LOU BARLETTA, Pennsylvania
RICHARD HANNA, New York
ROBERT SCHILLING, Illinois
ZQUEZ, New York, Ranking Member
NYDIA VELA
KURT SCHRADER, Oregon
MARK CRITZ, Pennsylvania
JASON ALTMIRE, Pennsylvania
YVETTE CLARKE, New York
JUDY CHU, California
DAVID CICILLINE, Rhode Island
CEDRIC RICHMOND, Louisiana
JANICE HAHN, California
GARY PETERS, Michigan
BILL OWENS, New York
BILL KEATING, Massachusetts
LORI SALLEY, Staff Director

PAUL SASS, Deputy Staff Director
BARRY PINELES, Chief Counsel
MICHAEL DAY, Minority Staff Director
(II)
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CONTENTS
OPENING STATEMENTS
Page
Hon. Mike Coffman ..................................................................................................

Hon. Kurt Schrader .................................................................................................
1
2
WITNESSES
Mark Smith, President, Merritt Hawkins, Irving, TX ..........................................
Louis F. McIntyre, M.D., Westchester Orthopedic Associates, White Plains
Hospital Physicians, White Plains, NY ..............................................................
Joseph M. Yasso, Jr, D.O., Heritage Physicians Group, Independence, MO ......
Jerry D. Kennett, M.D., F.A.C.C., Senior Partner, Missouri Cardiovascular
Specialists, Vice President and Chief Medical Officer, Boone Hospital Center, Columbia MO ................................................................................................
2
4
6
8
APPENDIX
Prepared Statements:
Mark Smith, President, Merritt Hawkins, Irving, TX ..................................
Louis F. McIntyre, M.D., Westchester Orthopedic Associates, White
Plains Hospital Physicians, White Plains, NY ...........................................
Joseph M. Yasso, Jr, D.O., Heritage Physicians Group, Independence,
MO ..................................................................................................................
Jerry D. Kennett, M.D., F.A.C.C., Senior Partner, Missouri Cardiovascular Specialists, Vice President and Chief Medical Officer, Boone
Hospital Center, Columbia, MO ..................................................................
Additional Materials for the Record:
So Long, Marcus Welby: Obamacare, Market Kill the Solo Private Practice, by Bruce Japsen, Forbes .....................................................................
Henninger: Obamacares Lost Tribe: Doctors, by Daniel Henninger, The
Wall Street Journal ......................................................................................
More Doctors Giving Up Private Practices, by Gardiner Harris, The
New York Times ............................................................................................
Is Private ObGyn Practice on its Way Out? by Lucia DiVenere with
OBG Management Senior Editor Janelle Yates, OBG Management .......
Demise of the Solo Doctor, by Parija Kavilanz, CNN Money ....................
A Small Business Plan All Can Agree On, Chairman Sam Graves,
POLITICO .....................................................................................................
(III)
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HEALTH CARE REALIGNMENT AND REGULATION: THE DEMISE OF SMALL AND SOLO
MEDICAL PRACTICES?
THURSDAY, JULY 19, 2012
HOUSE OF REPRESENTATIVES
COMMITTEE ON SMALL BUSINESS,
SUBCOMMITTEE ON INVESTIGATIONS,
OVERSIGHT AND REGULATIONS
Washington, D.C.
The Subcommittee met, pursuant to call, at 10:00 a.m., in Room
2360, Rayburn House Office Building. Hon. Mike Coffman (chairman of the subcommittee) presiding.
Present: Representatives Coffman, Tipton, Schrader, and Hahn.
Chairman COFFMAN. Good morning. The meeting is called to
order. I want to thank our witness list for being here today. We
look forward to your testimony.
Today, we meet to examine the changing landscape of small and
sole position practices. For many years, newly-licensed physicians
typically joined a private practice or open one of their own. According to Merritt Hawkins, a national physicians recruiting firm,
whose president is testifying today, only 1 percent of its searches
in 2011 were for independent practices, the lowest in the firms 28
year history and down from 22 percent in 2004. Many people believe that small and solo practices in order to survive, they will
look very different than the medical practices in past years. These
shifts appear to be rooted in the increasing economic pressures,
younger physicians, they want freedom from the long hours and administrative burdens of owning a private practice and they need financial help with student loans, medical liability insurance, and
health information technology. Established physicians have cited
declining reimbursements and increasing regulations such as the
reporting requirements for health information technology and the
push towards accountable care organizations as reasons small and
solo practices have become economically unsustainable.
In a recent Wall Street Journal op-ed, Daniel Henninger described practicing medicine as a health care laws biggest loser. We
are interested in learning how all of these factors, including the requirement of the health care law which was upheld by the United
States Supreme Court may affect small practices.
We have an exceptional panel of witnesses to help us understand
these issues. Welcome, we look forward to your testimony.
Dr. Schrader, do you have any opening
(1)
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Mr. SCHRADER. I will just submit mine for the record, Mr. Chairman. Thank you.
Chairman COFFMAN. Thank you.
The subcommittee members have an opening statement prepared
and that is within the Senate for the record. I would like to take
a moment to explain the timing lights to you.
You will each have five minutes to deliver your testimony. The
light will start off as green. When you have one minute remaining,
the light will turn yellow. And, finally, it will turn red at the end
of your five minutes. I ask that you try to adhere to the time limit.
Our first witness today is Mark Smith, president of Merritt Hawkins in Irving, Texas, a leading physicians recruiting firm for
small, independent practices, group practices, and hospitals. Mr.
Smith has over 21 years of experience with Merritt Hawkins and
is an expert in medical staff planning and physician staffing. He
is a graduate of Oregon State University. Welcome. You have five
minutes to present your testimony.
STATEMENTS OF MARK SMITH, PRESIDENT, MERRITT HAWKINS; LOUIS F. MCINTYRE, M.D., WESTCHESTER ORTHOPEDIC ASSOCIATES, WHITE PLAINS HOSPITAL PHYSICIANS;
JOSEPH M. YASSO, JR, D.O., HERITAGE PHYSICIANS GROUP;
JERRY D. KENNETT, M.D., F.A.C.C., SENIOR PARTNER, MISSOURI CARDIOVASCULAR SPECIALISTS, VICE PRESIDENT
AND CHIEF MEDICAL OFFICER, BOONE HOSPITAL CENTER
STATEMENT OF MARK SMITH
Mr. SMITH. Thank you. Mr. Chairman and distinguished subcommittee members, good morning. My name is Mark Smith and
I am president of Merritt Hawkins Associates, the largest physician search consulting firm in the nation and a member of the
AMN Health Care.
In the course of my 22 years at Merritt Hawkins, I consulted
with thousands of physician practices and my company has produced numerous white papers, surveys and books concerning physician practice pattern related topics.
I appreciate the opportunity today to address the subcommittee
on the decline of solo and small physician practices.
For those who remember the Marcus Welby, M.D. nightly TV
show, we still have an image in the mind of a physician as a small
business owner running their own practice. This classic model of an
independent physician practice still exists today, but is rapidly becoming a relic of a bygone era.
Today, physicians are more likely to be employees than they are
to be medical practice owners. This is particularly true of medical
residents completing their training. In the 2011 survey of final-year
medical residents by Merritt Hawkins, only 1 percent chose to be
a solo private practice physician. By contrast, 60 percent said they
would prefer to be either a hospital employee or work for another
entity. In short, virtually no one wants to be a Marcus Welby anymore. This represents a fundamental transformation and structure
of physician practices away from the classic private practice model
and towards employment and an increasing number of other practice options.
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The five primary reasons for this transformation taking place:
flat or decline in reimbursement, growing regulatory and administrative burden, malpractice costs, information technology implementation, and the effects of health reform, both the legislative and
evolutionary.
First reimbursement. For todays Marcus Welby, both Medicare
and private insurers typically pay physicians for usual and customary charges. Physicians generally were paid for services
invoiced in an amount above the cost of doing business. This system has been repeatedly modified in an effort to reduce cost and
to manage care. Physician reimbursement in some cases has been
cut or has not yet faced with inflation.
As a result today, physicians see little connection between their
costs and the amount to which they are reimbursed. This is a difficult business model to sustain. Some small private practices are
having trouble keeping their doors open. There have even been reports in recent months of a growing number of practices going out
of business, something I have not seen in my 24 years with this
organization.
By contrast, employment provides physicians safe harbor from
todays challenges and from the uncertainties that lie ahead. Regulatory burdens, virtually all businesses are subject to regulatory
compliance of some kind. Medical practices are no different. As a
small business owner, physicians must abide by Equal Opportunity
and worker safety laws, state and local ordinances, and many other
rules and regulations. Adding a layer of complexity, physicians
must work in the most highly of all regulated professions, having
to comply with HIPAA, stark laws, Medicare, and many other regulations. It is concerning to me that a survey conducted by Merritt
Hawkins stated that physicians spend 26 percent of their time
doing paperwork. Many physicians see employment as a way to escape the rising tide of risk and regulation and allow them to focus
on patient care.
Malpractice. Among the greatest cost of doing business, small
business owners must pay for their own malpractice insurance, the
cost of which could be debilitating.
For example, the annual premium for malpractice in some parts
of Florida for an obstetrician can exceed $160,000 a year. As malpractice rates remain high, the former becomes an attractive option
to physicians, as employers typically pay for this benefit.
For a variety of reasons, physicians are obliged to incorporate a
growing level of information technology into their practice, particularly EMR or Electronic Medical Records.
While the federal government has provided reimbursement funds
for physicians to implement EMR, many still find it difficult due
to a lack of time and available expertise. EMR implementation is
the key example of resources, expertise, and time a small medical
practice are being taxed in todays increasingly complex medical environment. A growing number of physicians are embracing employment again as potential refuge from these challenging concerns.
Health reform is a driver of a number of health care trends, including the decline of small, private practices. Health reform encourages the consolidation of physicians into larger entities to be
economies of scale.
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In addition, health reform promotes the formation of new delivery models such as Accountable Care Organizations or ACOs which
depend upon hospital and physician alignment in the use of advanced information technology. ACOs are also risk-bearing entities
and as such require a high level of administrative and business expertise and it is difficult for a solo and all practice physicians to
participate in these models, which naturally lend themselves hospital employment for physicians.
Combined, these factors with others have created conditions in
which small, private practice is increasingly untenable. This model
is only likely to survive in small, rural areas, where there are few
physicians and even in these segments, physicians will need to affiliate with larger entities. Otherwise, physicians are likely to be
employed by multi-physician groups like hospitals and the era of
Marcus Welby will rapidly disappear into our rearview mirror.
Thank you for the opportunity to address the subcommittee for
examining the challenges facing Americas solo and small practice
physician.
Chairman COFFMAN. Thank you for your testimony.
At this time, our next witness is Louis F. McIntyre, a medical
doctor, a board-certified orthopedic surgeon practicing in White
Plains, New York. Dr. McIntyre and his partners had operated a
small practice since 1994, but in the fall of 2011, they sold their
partnership to a hospital group and joined the hospitals employees.
He earned his medical degree from the New York Medical College
at Valhalla. How do you say it?
Mr. MCINTYRE. Valhalla.
Chairman COFFMAN. Valhalla.
Mr. MCINTYRE. Land of the gods.
Chairman COFFMAN. Okay. Dr. McIntyre is a member of the
American Association of Orthopedic Surgeons and is testifying
today on their behalf.
Welcome. You have five minutes to present your testimony.
STATEMENT OF LOUIS F. MCINTYRE
Mr. MCINTYRE. Thank you, Mr. Chairman and members of the

committee to allow me to testify today and tell my little small practice story.
I joined Westchester Orthopedics in 1994. The practice resided in
a small office and we had a few employees and we wanted to grow
the practice and improve the quality of care that we delivered. So,
in 1995, we moved to a much larger office space, hired more physicians, free parking. Patients love free parking, and added more
docs.
The late 1990s brought two challenging trends: decreasing reimbursement and increasing business cost. We needed more employees to handle the clerical demands and by managed care and yearly
malpractice premiums went from $40,000 to $110,000 per doctor
from 1994 to 2011. As a small practice, we were unable to negotiate
favorable rates because we did not have market share. We formed
a network of orthopedic surgeons to try to change that, but we
were unable to affect rates because of anti-trust concerns.
To remain viable, we added more doctors in ancillary services
and implemented an electronic medical record. Our total cost for
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the EMR implementation was about $500,000, which represents
about $100,000 per doctor. Initially, we saved some money with
EMR, but over time, that was negated by the need to upgrade the
system and hire data entry personnel. We built an ambulatory surgery center and acquired additional office space to build a physical
therapy center to standardize the quality of the physical therapy
that our patients received.
When completely configured, we had just under 50 employees.
All had health insurance, all had a generous profit-sharing plan, all
had paid vacation and leave and sick leave. Patients appreciated
the convenience of being able to receive all their musculoskeletal
care in one coordinated and contiguous setting.
The negative pressure on reimbursement, however, continued.
The American Academy of Orthopedic Surgeons estimates that orthopedic surgeons with Medicare reimbursement revenue decreased
28 percent in the last decade alone. Reimbursement from private
payers has also fallen and practice costs, unfortunately, continue to
rise.
Laws recently passed by Congress have further stressed private
practice. The American Recovery and Reinvestment Act mandated
the adoption of EMR for all physicians serving Medicare patients.
Even though we had previously implemented an EMR, the meaningful use criteria accompanying the regulations still represented a
significant cost burden for us in terms of data collection and quality reporting rules.
The Patient Protection and Affordable Care Act proposes new,
complex risk-sharing methodologies that many small practices, if
not most, will not be able to comply with. The combination of decreased reimbursement, increased reporting requirements, huge
outlays for technological improvements, and uncertainty about future potential earnings are driving physicians to seek employed positions. Doctors know that they cannot meet all the demands
placed upon them now and see patients at the same time. According to the AAOS, the employment of orthopedic surgeons by hospitals has increased 300 percent in the last 5 years.
Last year, we decided to become hospital employees. This year,
the other orthopedic group in our town also is going to become employees of the same hospital. The multi-specialty group next use,
WESTMED, has 225 employee positions. Clearly, the employee
model is winning in Westchester County.
There are advantages for employee positions. Doctors have more
financial security with a salary, they do not have to worry about
losing money taking care of uninsured patients, they are free from
dealing with some of the troublesome human resources and IT
issues, but employment, however, significantly decreases physicians autonomy and infecting the care environment. Physicians are
in a unique position to interact with patients on a daily basis and
identify deficiencies in care. Physicians ability to advocate for patients is diminished by employment because they no longer manage
the care environment.
As more physicians seek employee positions, there will be a generation of physicians who will never experience private practice
and the business of taking care of medicine. They will be unaware
of the costs and management issues of providing care.
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There is concern that an employed position will see less of a need
to join medical specialty societies that have added great value to
patient care. How these concerns will affect the profession is unknown at this time.
In the future, I fear that physicians may unionize to protect their
economic interest. I believe this would herald the end of medicine
as a profession and the start of medicine as trade associations.
It is rarely mentioned, but private practice employs people and
pays taxes. A recent study conducted by the Medical Society for the
State of New York showed that the private practice of medicine
was the fifth largest employer in Westchester County, second in
business establishments, third in personal income taxes paid, and
seventh in corporate sales taxes paid.
As a hospital employee, our practice is now tax-exempt. The loss
of employment and tax revenue resulting from private practice
physicians migrating to hospital employment may be significant
and worthy of further study.
Finally, there will not be employed positions for all the doctors
in Westchester County or the United States. There is and will continue to be an increased need for physicians, especially with the
implementation of PPACA in 2014. If private practice disappears,
patient access to care, local employment, and tax revenue will suffer. We need to strengthen private practice as well as other models
of health care delivery to ensure patient access to quality of care.
Thank you for the opportunity to share these thoughts.
Chairman COFFMAN. Thank you, Dr. McIntyre.
Our next witness is Joseph Yasso, junior doctor of
Mr. YASSO. Osteopathic medicine.
Chairman COFFMAN. Osteopathic medicine, I am sorry. A boardcertified family physician, medical physician, and medical director
of the Heritage Physicians Group in Independence, Missouri. He is
a member of the American Osteopathic Association and is testifying today on their behalf.
Welcome. You have five minutes to present your testimony.
STATEMENT OF JOSEPH YASSO
Mr. YASSO. Thank you. Chairman Coffman, Ranking Member

Schrader, and members of the subcommittee, on behalf of the
American Osteopathic Association, thank you for the opportunity to
testify today.
As a board-certified osteopathic family physician, I proudly treated patients for over 30 years. My current practice is comprised of
three physicians, including myself and a family nurse practitioner.
We are owned by the Hospital Corporation of America.
Today, I am pleased to share with you my personal experience
of how impactful health care realignment and regulations are upon
decisions made by new and established physicians alike.
After leaving the Army in 1980, I entered a small practice with
two other physicians that we ultimately chose to sell in 1992, due
to multiple financial and regulatory concerns similar to those my
colleagues in practice are facing today. Today, physician practices
face new demands as required by statute and regulation. These include the adoption of electronic health records and electronic prescribing systems, preparation for coding under ICD10, implemen-
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tation of quality measures, and adjusting to other changes in the
health care delivery system. These additional policies and procedures are important and are primarily beneficial to efficiency as
well as to providing improved patient care. However, each new requirement can be quite costly to the physician practice operating
as a small business.
The burden on small practices is particularly disproportionate,
detracting from the time available for patient care. In addition, the
looming physician payment cuts under the SGR for small practices
with limited revenues and narrow margins to make difficult decisions about whether to lay off staff, reduce the Medicare patient
population, defer investments, opt for early retirement, or sell their
practice. My first small practice of three buckled to these concerns
and we opted to sell.
Todays medical school graduates are faced with difficult decisions after completing their education and training. The average
osteopathic medical school graduate has a debt nearing $200,000.
As you can imagine, this makes the prospect of opening a small
practice extremely daunting.
This spring, the American College of Osteopathic Family Physicians conducted a survey of its membership, including questions related to practice types and settings. The survey found that 60 percent of family physicians are employees with no ownership stake
in the practice. Often, the overwhelming collective burdens I mentioned today are cost prohibitive and outweigh a physicians desire
to enter or remain in a small or solo practice. There are also physicians who wholeheartedly embrace the choice of becoming an employee physician. Physicians should not be forced to enter an employed situation out of pure necessity. They should retain their option to choose their ideal practice type absent undue financial considerations and regulatory burdens.
Medical homes and ACOs provide opportunities for physicians to
continue managing patient care while still being able to operate as
a small or solo practitioner. Either model requires a physician to
be employed by a hospital or large health system in order to be
successful. Appropriately aligned, incentives can serve to foster success regardless of practice type. Regulators should be cautious in
creating additional financial burdens on physicians that would inhibit their ability to choose a practice setting that is most appropriate.
In closing, the transformation of the practice of medicine has undoubtedly impacted the ability of physicians to thrive in a small
practice or as solo practitioners. However, physicians are adapting
to the changing practice of medicine by becoming patient-centered
medical homes and participating in shared savings programs. As
we work to improve the health care delivery system for patients,
physicians must be provided appropriate payment and incentive to
practice effectively in the setting of their choice. Patients deserve
this level of access.
I would again like to thank you and the members of the committee for affording me the opportunity to share my experiences
and the AOAs perspective regarding this important topic affecting
osteopathic physicians and our patients. We appreciate the work
that you do to promote policies that enable physicians to success-
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fully operate as small business absent undue regulatory and financial burdens. We look forward to working with you in the weeks
and months ahead to ensure that congressional action fosters rather than impedes the physician-patient relationship.
Chairman COFFMAN. The Chair now yields to Dr. Schrader for
the introduction of our next guest.
Mr. SCHRADER. Thank you, Mr. Chairman. It is my pleasure to
introduce Dr. Jerry Kennett. Dr. Kennett has practiced interventional cardiology in Missouri for the last 30 years as a senior
partner of Missouri Cardiovascular Specialists and vice president
and chief medical officer of the Boone Hospital Center. He has
maintained a busy clinical schedule while also participating in a lot
of clinical research in education. He is testifying today on behalf of
American Academy of Cardiology. The college has 40,000 members
and he has dedicated to enhancing peoples lives through cardiovascular treatment intervention. We welcome Dr. Kennett.
STATEMENT OF JERRY KENNETT
Mr. KENNETT. Good morning. Thank you, Member Schrader and

Chairman Coffman and members of the subcommittee. We appreciate your inviting us to testify here today.
I am Jerry Kennett, chairman of the American College of Cardiology Advocacy Steering Committee. The ACC, as said, is a 40,000member medical society serving the needs of both providers and
patients.
I am a cardiologist with Missouri Cardiovascular Specialists, a
17-person cardiology and cardiovascular surgery practice in Columbia, Missouri.
My group was one of those typical office-based practices with
over 100 employees. Our practice included a cardiac diagnostic center, where patients had easy access to echocardiograms, stress
tests, and even an outpatient cardiac categorization laboratory.
A little more than a year ago, our group was an independent
practice, but now we are integrated with Boone Hospital Center in
what is termed a professional service agreement. According to the
2011 Lewin Group report on the economic impact of office-based
physician practices, these small businesses, such as ours, account
for 4 million jobs across the United States with $833 billion in
wages and benefits. These small businesses generate $63 billion in
state and local tax revenue.
Physician practices are different from almost any other small
businesses. The payment for services performed is not controlled by
free market dynamics, but instead payment is tightly regulated by
Medicare and Medicaid and private payers who essentially follow
the lead of the government with the recipient of the services or patient often paying only a fraction of the cost.
Recent events have had a dramatic effect on private practice cardiology. The ACC estimates that 60 to 70 percent of our current
physician members have now integrated with hospitals.
Why has this happened? There are a variety of factors that have
contributed to this evolution. The prominent reasons relate to
Medicare physician payment not keeping up with actual practice
costs, direct cuts in Medicare physician reimbursement, and increased administrative and regulatory burdens. All these add up to
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tremendous uncertainty among physicians as to what the future
holds and so many physician practices such as mine see hospital
integration as their only choice.
Every year since 2002, physician practices have been threatened
with significant cuts in Medicare reimbursement, the so-called
SGR. This uncertainty stifles physician practices from making real
investments in improving coordination, reducing the current fragmentation of care, and reducing waste.
Another major turning point for cardiology occurred in 2010 with
the Medicare Physician Fee Schedule, which reduced payments to
cardiology practices or some in-office procedures as much as 35 percent. How many small businesses could survive a 35 percent cut in
payment for the exact same service? Our practice, like many others, could not.
There are also a significant number of regulatory and administrative burdens that contribute to the uncertainty for physician
practices and hinder their ability to grow. A few examples are audits. While physician claims for services are generally subject to
contractor medical review, greater scrutiny in recent years has increased costs and uncertainty. Physician claims must comply with
multiple edits, as well as recovery audit contractors.
ICD10. The Center for Medicare and Medicaid Services will
soon implement ICD10, a diagnostic coding system that will increase the number of diagnosis a physician has to choose from
15,000 to over 87,000.
Multiple Medicare penalties. Starting in 2011, Medicare began to
penalize physicians for not meeting the requirements of certain incentive programs. In the coming years, physicians will be penalized
for not prescribing electronically, not participating in meaningful
use of an electronic medical record, and not submitting quality data
through the Physician Quality Reporting System, as well as a yetidentified value-based modifier.
Finally, physicians have significant anxiety regarding the future
of Medicare payment reform, as you have heard. The new payment
methodologies, such as ACOs, bundled payments at medical homes
will require additional staffing with no assurance they will produce
any shared savings. Physicians are afraid of being left out.
In conclusion, the financial pressures associated with declining
reimbursements and rising operational costs on private cardiology
practices have resulted in the rapid migration of practices to hospital affiliation. Continued cuts in Medicare reimbursement combined with increasing overhead costs, increased regulation, unfunded mandates, a micromanaged payment system, and an uncertain future are making it difficult for practices to remain viable.
We believe that a well-functioning Medicare payment system could
provide opportunities for physicians to practice both independently
or as employees of a hospital. Increased payments should come
from increased quality and demonstrate appropriate utilization and
physicians should be appropriately paid for the increasing expectations associated with the practice of medicine.
Thank you for the opportunity to share my views and look forward to any questions.
Chairman COFFMAN. Thank you so much for your testimony. I
really appreciate all of you taking the time to be here. Let me just
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open it up with a few questions and then I will defer to my colleagues on the subcommittee.
All of you had mentioned rising administrative costs as a factor
in hurting solo and small practices. Back home in my district, I
was just talking to a woman who is starting a new concept to help
child care providers by simply doing their administrative work to
back office work to allow them to focus on child care and her entity
then focused on the administrative compliance.
Is there any movement to assist small practices with these third
party organizations? I know they have existed in say Medicaid,
Medicare, but just in overall administrative work and all the compliance things that you have to do toare there such entities
emerging to relieve some of the cost pressures on small and solo
practices?
Mr. SMITH. There are businesses that have evolved to fill that
need that exists with physicians, I mean, more of these administrative burdens placed on their shoulders and some can work quite
well. In the new legislation, that intensifies greatly the changes, as
mentioned, are very significant, but even if you are able to
outsource that, it comes at a cost and it comes at a cost when you
are looking at your revenues either being flat invests or declining.
So, again, it opens up that option to make employment seem much
more attractive as to transferring that burden to someone else.
We mentioned in the survey that Merritt Hawkins had that 26
percent of a physicians time was in paperwork. And, so, in essence,
you have a hidden army of about 200,000 physicians out there that
are doing something other than they were trained. So, anything
that we can do to relieve that burden outside of just the pure employment option that will allow them to focus on patients which I
am sure that folks sitting at the table would much prefer to do
than to do paperwork would be of great assistance.
Chairman COFFMAN. Dr. McIntyre.
Mr. MCINTYRE. My experience in our practice was that there
were many entities that could help us with individual things. Billing. We outsourced billing. IT. We could outsource a lot of stuff to
IT, but there was not any umbrella organization that would come
in and say we will do it all for you. It sounds like a great business,
actually.
So, the hospital assumes all those tasks for you. I think that is
what makes it attractive to many physicians who are just looking
for a way out so that they can concentrate on patient care instead
of regulatory burdens.
Mr. YASSO. When we sold our practice in 1992, of course, we did
not have the IT piece to worry about back I those days, but we
were doing our own billing and managing the practice ourselves
and doing quite well.
When we sold to TriSource, they right away started charging us
a $7,000 a month management fee and a $7,000 a month billing
fee. That was $14,000 a month of overhead that we did not have
before. So, all of a sudden, the practice that was in the black was
now in the red because we had such a tight margin. And, so, if you
do those kinds of things, that is the cost that you have to bear to
get those things done.
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Mr. KENNETT. In private practice, there are always consultants
and companies that want to come in and do things for you. They
say they can do it more efficient and better and usually that does
not have to be the case, that usually the costs are as great as before.
As you might imagine in these small businesses, the physician
practices, they are so regulated and so many things we have to
deal with that your overhead sometimes in small practices can be
as much as 80 percent. So, it becomes overwhelming and that is
one of the reasons that as mentioned they tend toward employment.
Chairman COFFMAN. Most of you mentioned medical malpractice
as an issue and the small or solo practice dissolving and moving
into as employees or into a larger physicians group or employees
of a hospital. But those costs do not change. Is it that just as a
function of cash flow, as you got a small practice and there is a
bump in cash flow and you have got this big overhead issue like
paying your premiums on a medical malpractice policy, is that essentially the problem because I do not see where the costs are
changing. They are very high, obviously, higher than they ought to
be, but I do not see them materially changing from the individual
from the small practice to a larger practice or as to employees of
a hospital.
Mr. MCINTYRE. Well, personally, my malpractice went from
$40,000 a year in 1994 to $110,000 in 2010. We paid that and at
one time, we had 7 orthopedic surgeons, almost a million dollars
in malpractice premiums per year. That was a big number.
Human resources, obviously, was the single most expensive item
in our budget, but right below that was malpractice and it really
became a burden to pay the malpractice, so much so that we shifted from doing it in quarterly payments to shifting to monthly payments. It was really a cash flow burden for us.
Going to the hospital, the hospital assumes that cost. We do not
see that cost at all and many of the hospitals are self-insured in
regards to malpractice.
Chairman COFFMAN. Okay.
Mr. MCINTYRE. So, that may affect the rates, but my personal experience, my hospital now is paying my malpractice premium for
the policy that I have. Now, I would imagine at some point in time,
that is going to be subsumed by their own malpractice policy.
Chairman COFFMAN. Okay. Does anybody else have any
Mr. SMITH. Well, just keep in mind that with these physicians,
since Dr. McIntyre joined the hospital-based practice, the hospital
loses money. There is not a true savings that occurs from him coming over. They typically lose money on these practices, but the hospital has to have physicians in the community. They really have no
choice but to bear that potential loss.
Chairman COFFMAN. But is it cheaper if a larger entity can be
self-insured and manage its own liability or do these hospitals still
carry third party insurance?
Mr. YASSO. Well, Hospital Corporation of America in the metropolitan area of Kansas City employs over 250 physicians. I would
think they get a bit of the economy of scale
Chairman COFFMAN. Okay.
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Mr. YASSO [continuing]. To some degree if they stick with one insurer and probably get a rate break to some degree.
Chairman COFFMAN. In looking at the new health care law, the
Affordable Care Act, there is a movement I think borne of that to
accountable care organizations. So, there has been a trend prior
certainly to the Health Care Act, a movement away as you all have
tried from the solo practice, the small physicians group to larger
practices and to employees at hospitals. How has the current
health care law or has it accelerated by that process?
Mr. SMITH. There is no question it has accelerated that process.
It had the fear of the unknown and I think a lot of wait and see,
see what would happen from the Supreme Courts decision. It has
picked up the pace quite a bit. I would say as ACOs come closer,
hospitals realize there is bundle payments looking for partners. At
the same time, you see insurance companies not wanting to be left
out as you have seen with Highmark in Pennsylvania buying hospital systems. So, there is a bit of a race for that finish line and
physicians might experience running for cover because of the intensity of the penalties within the system.
Some information we could provide is there is so much more regulation and the penalties are so great, I find physicians very fearful
that they will make an honest mistake and being held accountable
financially.
Mr. KENNETT. Speaking from my administrative side, I would
say that probably the health care law has accelerated more on the
part of the hospitals probably more so than physicians because of
the fact of the Accountable Care Organizations, the bundle payments, and measures in there that the hospitals want to be sure
they have enough primary care physicians particularly as well as
specialists that they can have in their Accountable Care Organizations to being able to participate. I think it has brought about some
acceleration on the part of physicians just because of uncertainty,
but as you mentioned, so many of these thing we talked about actually predated the Affordable Care Act.
Chairman COFFMAN. Sure. I am going to ask one more question
and then defer to Dr. Schrader and but then I will come back probably and we will go back and forth. Oh, and I am sorry, Ms. Hahn,
as well, from California. And that is that you talked about the patient-doctor relationship being compromised, if you will, through
the movement of the solo or small group practice to the larger
group practice or to employees of a hospital. I wonder if you could
all elaborate on that and please be specific in terms of examples
of how you think that changes the patient-doctor relationship, this
movement.
Mr. YASSO. I think that one of the ways it change that, when you
become an employed physician for particularly those physicians
that come directly out of residency and become employed physicians and have never practiced in solo practice or owned their own
business, it is more of a business now and it is I work for X number of dollars and I work X number of hours a week and that is
all I do. I may not stay a little longer to say Ms. Jones, let us work
her in or see that extra patient because they want to be seen, they
need to be seen that day and do that. And you hear stories about
that all the time about how physicians tend to cut it off and say
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well, I used to see 30 a day. Well, now I see 26 a day or I see 22
a day and those types of things and it is a problem, I think.
Mr. MCINTYRE. My practice is two miles from my house, and, so,
I take care of the people that live in my community. My reputation
is predicated upon how I do that. So, not only was I very concerned
about being a good physician, but running a good small business
in my community. And what I said before in the testimony was
that I had great ability to affect the atmosphere and the business
that was there because I ran it. So, if things were brought to my
attention by patients or staff or whatever, that we were deficient
in that area, well, you can be sure that we changed that. Now, I
am really not responsible for the policies of the practice; the hospital is. So, I am a little bit hamstrung in my ability to affect those
policies.
Yesterday, a patient came in. Supposedly, one of our doctors was
not on the insurance panel because the hospital had not gotten us
all on the various insurance plans yet and the patient was told
well, you cannot see the doctor that you have seen for 10 years. If
I were running the practice we would just have seen the patient
and dealt with the insurance issues later. So, I think that when
you are vested in your practice as a physician and also as a business man or woman, that lends a whole different color to the way
you approach it.
Mr. KENNETT. I might differ slightly because of the fact that I
do not think being employed has changed my physician-patient relationship. I think I feel the same about my patients as I always
have in the past 30 years. There is a lot of regulatory and reimbursement issues that have affected relationships because we cannot provide the services we used to provide. That is a real concern.
And, quite honestly, there is an evolution in medicine that is going
to change physician-patient relationships in the fact that we now
have intensivists, we have hospitalists, we have an nocturnist, we
have shift medicine, and that is what the younger physicians like
in many instances. And, so, that is changing the physician-patient
relationship.
Mr. SMITH. I would add quickly the difference to me, the patient
is access. Today, we have a shortage of physicians in many parts
of the country and surveys I have read had shown that employed
physicians, the risk off the table, they are no longer business owners, see about 7 percent fewer patients and this is at a time we already have a shortage and we are looking to add 30 million people
for this process. To me, that is a great concern.
Chairman COFFMAN. Dr. Schrader.
Mr. SCHRADER. Thank you, Mr. Chairman. Well, thank the panel
as I guess retired, small business. Been a practitioner for 35 years,
started my own business from scratch when you could do that sort
of thing. My humble opinion, much as had been stated here, I
mean, that is almost impossible to do. I do not care what sort of
medical practice you are into. I mean, the tax law has gotten byzantine. I actually did my own tax returns when I started my practice. It was actually doable and I felt like I was not committing
and the regulatory burden, and certainly those in the medical profession, with all the different regulatory frameworks come out, the
SGR has been a sword of Damocles hanging over every physicians
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head, I do not care who you are, for many years. Sometimes we
treat it almost cavalierly here in D.C. because we never let it happen, but it is still there and it is still disrespectful, I think, of the
hard work that folks put in. It makes it pretty tough. It makes it
pretty tough.
The debt burden now that youngsters came out with, I mean,
gosh, my tuition, I am embarrassed to say, graduated college a few
years ago, like $700. Students would kill themselves to do that
now. I am a dinosaur, but not that much of a dinosaur.
But the other thing I think the panel has alluded to a little bit
that did not get brought out is there is a change in attitude among
the young people. I do not care, and this is not just the medical
profession, I see this in a lot of my other business friends and associates where the idea of starting a risk-based enterprise, well, there
are lots of great entrepreneurs in our great country, thank goodness, and that is what is going to make and continue to make our
country great. In some professions, they are a little less more risk
diverse for a lot of the reasons you all have just enunciated here.
It seems almost daunting for these people with the debt they come
out with, the regulatory burden that is out there, the uncertainty,
and I will grant that the ACA does create some uncertainty out
there. It is one of many issues I think face our medical community.
I would like to get some thoughts about potential solutions going
forward here. So, I guess one main question I would ask the panel
here is of the many things you have talked about today from taxes
to debt, SGR to other regulatory burdens, ICD10 codes, some of
the aspects of the ACA, what is the single most or one or top two
burdens that we should talk about trying to eliminate or change
and make less burdensome for you guys to get it back to the practice of medicine that we all do so well?
Mr. KENNETT. So, Congressman, I think that, to me, without a
doubt, the biggest thing you can do is to eliminate the SGR and
have a stable platform for physician payment that is fair for the
appropriate service that they are providing going forward so that
the physician is on a yearly, monthly sometimes basis, do not know
what the payment is going to be next year and do not know if their
claims are going to be held and they have to go borrow money to
make payroll. So, taking care of the Medicare physician payment
platform going forward would be a huge step forward.
Debt, I think, is a very big issue for these kids coming out of
school today or residency. If we could find a way to either help
them defer their debt for a while so they have the opportunity to
go into private practice or if we could find a way, particularly if
they go into underserved areas and take care of people that truly
need help, to eliminate their debt so that they can stay in practice
and stay in areas where people truly need their service.
Mr. SCHRADER. Very good. Thank you.
Dr. McIntyre.
Mr. MCINTYRE. I think as a philosophy, we might want to inject
some market principles into the physician-patient relationship and
have providers compete not only on quality issues, but also on price
issues, which we have not done in decades. I think that might go
a long way to decreasing costs and increasing quality. If we decide
we do not want to do that, then I think to strengthen private prac-
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tice, we need to allow private practitioners to band together to negotiate rates without owners overhead structures so that they can
compete with what is becoming monopsony. We have the big medicine, big insurance, and the government, and with consolidation, I
do not think we are going to get the cost containment we need. I
think we need more players in the market to do that and facilitating private practices ability to negotiate, I think might go a long
way to contain cost and increase quality.
Secondly, I think malpractice tort reform will go a long way to
decreasing the costs not only of private practice, but of medicine in
general.
And, lastly, especially with the SGR being such a problem and
being so expensive and the problems in trying to eliminate it as
well as deal with Medicare reimbursement cuts that are supposed
to go through the ACA, perhaps, we might want to think about
bringing back balanced billing to the Medicare equation that was
part of the program for the first 20 years of its existence. And I
think it could be done in a way that would not hurt seniors, but
would allow private practice to continue to serve Medicare patients.
Mr. SCHRADER. Mr. Smith.
Mr. SMITH. Oh, I agree with all three topics mentioned: SGR,
medical debt, something we hear on a daily basis from the folks
that we are talking to, and tort reform. I would add to tort reform
that the impact goes beyond the malpractice. The cost of defensive
medicine is something that has been calculated in incredible numbers, where physicians are forced, they feel, to protect themselves
by doing additional tests under normal circumstances they might
not do. So, that cost is significant.
The other thing I would mention is to relax some of the regulations that are in Stark II as it implies to recruiting physicians in
the community. Being a solo practitioner is near impossible. If you
can get a partner or two partners, you have a chance. Unfortunately, stipulations in Stark II make it difficult because you cannot
share any of your costs. You have to bear that burden of the cost
that exists to bring a new associate in and most physicians cannot
go through that year process to wait for that new person to contribute to their overhead to be able to afford to bring them in. So,
that would be a real benefit.
Mr. SCHRADER. Very good. Very good.
Dr. Yasso, you talked about medical home, and I thought about
this myself, as maybe being a way to get back to where the physician is ultimately in control, one of the things that is in the ACA
that maybe needs to be fleshed out more. There was some loan forgiveness over a period of time for new students and that we tried
to give a little better deal for primary care docs that actually opted
to go into some sort ofin particular will do that, but primary
care.
But I thought that maybe the medical home, and everyone has
alluded to this. I mean, the doctors have to be in charge of decisionmaking, not the hospital, not the insurance company, not the outfit
you would hire to run all your books and stuff and can you elaborate a little bit about what would you be looking for, how would
you be talking to CMS about how to organize this so the docs are
in control?
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Mr. YASSO. Well, I think the PCMH is set up in such a fashion
that it is under the control of the physician. It is a collaborative
approach to medicine and a team approach where everybody is involved in the care of the patient. That includes the medical assistants in your office, your nursing staff, even the front office staff for
that matter. Everybody is involved in the care of that patient rather thanan even footing to a degree and things are done for the
patient by everyone, not just the physician, not just the nurse, but
everybody gets involved in the care. That is the whole idea behind
the patient-centered medical home. And then you develop relationships as a primary care physician, you develop relationships with
specialists that you know are going to provide quality care for your
patients and you deal with those people and you discuss the care
so that you know what kind of care that individual is receiving that
is the best possible care that they can get.
If you take that a step further and you look at the Accountable
Care Organizations, I was talking to a physician yesterday who
practices in the Phoenix area and they have been very successful
in setting up an ACO down there that is driven by primary care.
It is not driven by the hospital, it is not driven by the specialist,
it is driven by primary care, which seems to be very cost effective
and providing good, quality care.
So, I think two things. We need to keep in mind when we talk
about ACOs in particular is they need to be driven by physicians,
not the hospital. My concern when I first started hearing about
ACOs was that they were something akin to the old PHOs, Physician Hospital Organizations, which for all intents and purposes
was driven by the hospitals and that is what we really need to
avoid because the care, the rubber that meets the road is where the
patient sees the doctor and that is where the care is delivered. It
is not by the hospital per se on a daily basis. So, the physicians
really need to be in control of that.
Mr. SCHRADER. Dr. Kennett.
Mr. KENNETT. Just would like to make just two additional comments about medical homes. The first is medical homes, as Dr.
Yasso said, requires some additional resources within your office.
People teaching dieticians. So, we have to be sure that they are reimbursed adequately that they are going to be able to provide those
additional resources.
And the second is that the medical home needs to be assigned
to whoever actually should be in control of that patients care on
a regular basis. If that is a patient that is on dialysis, then really
the nephrologist probably ought to be their medical home, it is the
patient that has got chronic congestive heart failure, then probably
a cardiologist. There is a huge majority that should be in the hands
of the primary care physicians, but it needs to encompass all these
other specialties, as well.
Mr. SCHRADER. Just a final comment then, Mr. Chairman. I really appreciate this panel and the topic we are discussing. It is near
and dear to my heart and very concerned about the future of medicine from all walks of life.
As a little, old, country veterinarian, I enjoy the opportunity to
get to know my patients, see them from birth to their passing. It
is a beautiful thing. But I rely on the specialists. I think we have
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got a great relationship in the veterinary world where we are not
afraid to send it out. In the old days, it used to be keep everything
pretty close and the medicine has changed. Hopefully, physicians,
veterinarians, and other practitioners of all sorts have come to that
realization and we will work through that.
I guess my last point would be that I hope each and every one
of you are active in making sure that whatever comes out of health
care evolution, whether it is related to ACA or anything else, that
some of us are pushing to reform the SGR, this bill out there I am
cosponsoring with Allyson Schwartz and others to get rid of the
SGR and get to a smarter level playing field. She is actually like
a part of the solution and not just a part of the whipping child that
is out there at the end of the day. But, hopefully, it will be a good
process, a better process at least going forward and I appreciate
the Chair bringing this issue to Small Business attention. Thank
you, sir.
Chairman COFFMAN. Thank you, Dr. Schrader.
Ms. Hahn from California, and I will relax the five-minute rule.
Ms. HAHN. Thank you, Chairman Coffman, Ranking Member, Dr.
Schrader.
I want to thank the Chairman for holding this hearing. Really
appreciate the witnesses that are here today, all of you who are involved in some aspect of health care and getting folks healthy. We
really do appreciate what you are doing.
It is interesting because, I mean, I know the more Affordable
Care Act is implemented and this lifestyle, I think a lot of the
issues as I understand that you brought up today are actually addressed in this new law.
Loan repayments. There is a lot about helping students repay
their loans or forgive their loans, particularly if they serve in areas
that have seen a shortage, talked about, Mr. Smith, the shortage
of physicians. There is actually a lot in the health care act about
providing incentives and scholarships to encourage more doctors,
physician assistants, folks to go into this field.
I agree with Dr. Schrader, there are many of us who want to
have a permanent doc fix and I hope we do that in Congress with
the SGR.
This is a small business committee, so, it is really interesting to
hear your views as it relates to being a small business person. I
am wondering how much training did you get, how much are students in medical school actually getting business training, would be
partnering with business schools and medical schools. And, again,
I am always trying to figure out what our Small Business Administration is doing to help small businesses. Is there a better role? Is
there any role? What is Small Business Administration doing as it
particularly relates to physicians who are attempting to run a
small business and what can we do better to help that aspect so
thatit sounds like we would like to ultimately see more doctors
continue to be in the role of being a small business owner.
Mr. MCINTYRE. Training would be zero. On-the-job training
would be zero. We learned it on the fly. And many of my colleagues
who I interact with in the regulatory arena have gone on to get
MBAs. I know a boatload of orthopedic surgeons, MBAs. So, there
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are a number of people who are doing that. But in terms of the Joe
lunch bucket doctor, I think that the training is pretty much zero.
Ms. HAHN. So, in medical school, there is no sense that it could
be an important part of your success as a doctor who wants to be
also a small business man?
Mr. YASSO. Some of the schools, my alma mater being one, offers
an MBA degree, but not to everybody. They keep it to a very small
number of students that can get involved in that. So, there is some,
but as far as any kind of formal training for everybody else or even
just basic business courses, no. There really is not.
As far as what can you all do, promote some of the things we
talked about, I guess, and some of the things that you mentioned
that are in the Affordable Care Act that might be helpful to make
sure that those things come to fruition. If they are unfunded mandates, they do not do us any good. So, that is really the key to see
that some of those things come out and really give us what we
need to promote people to at least consider going into solo practice
or small practices.
Mr. KENNETT. Congresswoman, I would say that certainty going
forward is what these small businesses need and that relates to
what we said. Reimbursement, knowing what you are going to get
paid down the road, and reducing the regulatory burden, which is
huge. If you could help those two, they would have a lot more businesses staying in practice.
Ms. HAHN. I am going to follow-up because the Affordable Care
law also aims to reduce paperwork and administrative costs by
standardizing billing, and between 2013 and 2016, the rules will be
implemented to standardize health insurance processing requirements.
Mr. Smith, you worked on this Merritt Hawkins whitepaper
where Physician practices should benefit from improved revenue
cycles and save time and money tracking claims. So, I am thinking
since these rules are not finalized yet, maybe this is an opportunity. Your whitepaper suggests that this is a potential cost savings. So, while we are considering these rules, what should we be
keeping in mind to maximize these potential cost savings within
this particular realm?
Mr. SMITH. Well, anything we can do to keep it as simple as possible would be a plus, which obviously we solve the depth and the
weight of Affordable Care Act to just pay for a loan and people are
just really digesting all the areas and attempting to refine some of
those areas. And to lessen the penalties in certain areas where
things are unknown. There is an example of which if there is a
whistleblower situation, the Medicare can suspend payment to the
physician for that whistleblower act if verified. So, in essence, you
could have a disgruntled employee who makes a claim, Medicare
suspends payment to the physician, and its over. And I would bet
that three physicians on this panel, if you had zero Medicare revenue from guilty to proven innocent could crush any of their practices and several examples like that, again, unintended consequences.
Ms. HAHN. Thank you very much.
Mr. MCINTYRE. I think that to standardize the billing process as
you alluded to in the ACA would go a long way. For example, Medi-
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care is about 23 percent of our business, but was our most prompt
payer. We could anticipate Medicare reimbursement within 18 days
of the bill being sent out as long as it was a clean claim.
Managed care companies on the other hand, had an average AR
timeframe of 45 days. And we got much more runaround and hassle from the managed care companies in regards to them saying a
claim was not clean, them wanting more information.
So, a standardization of that process, I think, would go a long
way to help the private practice.
Mr. KENNETT. Congresswoman, I can give you one quick example
of one of the regulatory things that happened to physicians that
make no sense. So, the rack auditors, which I am sure you are
probably familiar with that can go in and take money back from
hospitals for whether the patient inpatient or outpatient. So, now,
a patient can be in the hospital and just because there are some
regulations of you tell them that they are inpatient or you call it
inpatient or outpatient, same exact service is provided in the hospital, but then the rack auditor comes in and says no, they should
have been called outpatient. They can take back the physicians reimbursement any services that are provided during that hospitalization. It really makes no sense.
Ms. HAHN. Thank you.
Mr. MCINTYRE. So, there is one additional program, too, the
Medicare Administrative Contractors, which is also retroactively
denying services for lack of paperwork. For example, in orthopedics, the MAC are denying payment for total joint replacements
unless there is documentation of unsuccessful treatment with physical therapy for three months prior to the procedure. Not only is
this very costly but there is nothing in the literature that supports
that such treatment is efficacious. In addition, the rules of these
programs are unknown and they are enacted retroactively, making
them impossible to comply with. This really will affect patient care
negatively.
Chairman COFFMAN. Thank you, Ms. Hahn.
The Chair recognizes Mr. Tipton of Colorado.
Mr. TIPTON. Thank you, Mr. Chairman, and I apologize for being
late. We had a natural resources meeting, as well. So, I sent your
regards to that meeting. I know you could not be there because of
here.
I would like to thank our panel for being here. Incredibly important issue, particularly for districts like mine, rural Colorado,
54,000 square miles, and as I have traveled through those 54,000
square miles, just held a town hall meeting with senior citizens in
Pueblo, Colorado, last week, they are worried about the presidents
health care mandate and how it is going to impact them. I have
got senior citizens in Del Norte, Mono Vista, Alamosa, Cortez,
Crawford, Hodgkiss, Edgar, some towns a lot of people have not
even heard of, they cannot find a doctor that is willing to take
Medicare.
So, I guess, Mr. Smith, I would like to be able to start with you.
With a number of small business and a lot of our doctors are small
business people, solo practices, what effects will the presidents
health care mandate have on rural Americans, rural citizens access to health care in your perception?
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Mr. SMITH. My perception, the impact I look at first is of the patient. As you mentioned, very difficult as a patient. A new patient,
physician practice, could be seen if you have Medicare, especially
if you have Medicare without any kind of gap insurance. A physician has to limit the amount of Medicare that they see in their
practice to be financially viable. If you have pure financial to procure practice, it is not viable. The reimbursements are too low to
be able to do that.
Most physicians that I work with, we conduct about 3,000
searches a year around the country so we have an excellent of information will tell me that Medicare rates, they generally break
even as a cost of doing business. So, you have to keep that to onethird of your practice.
Some specialists, such as internal medicine, you might get it to
half, but you cannot have that happen. You see physicians as they
get older, their patients get older, and more and more Medicare
and you can look at their financials and they slowly dwindle until
such a day that the decision is I am working for free, I have to get
out of practice.
So, now, as we look at this, we have patients that could come
onto the system, was going to pay Medicaid rates and we are elevating them to Medicare, thinking that is going to be a driver for
physicians to see them. One, that is a temporary rate. Two, it is
not a factor and those patients, 30 million people we are adding to
the system, will have a card that gives them insurance or a version
thereof. What they will not have is access.
The second expense, the legislation does address some areas of
need, attracting people to the system. The shifting of unfilled primary care spots, that really is resulting in a few hundred positions,
but the issue is we can add as many people as we want to the medical schools, but we have not added a single dollar as it comes to
residency. And, so, all you will be doing is shifting foreign positions
out of the system and replacing them with American-trained physicians, but at the end of the day, there is the same number of physicians coming out of the machine and in places like Russia and
Trinidad and Serbia will still not be able to find a doctor because
there will be more attractive options in large states.
Mr. TIPTON. If we could, Mr. Smith, I would like to explore that
a little bit because you were focusing a little bit on the economic
Mr. SMITH. Okay.
Mr. TIPTON. From the doctors perspectivethe majority of doctors I know actually went into health care because they truly care
about people. They are going to limit the number of patients that
they can see simply because they want to be able to provide quality
health care. If you are trying to run them through like an assembly
line, is that going to reduce the quality of health care?
Mr. SMITH. Well, there is no doubt. I mean, the physician-patient
relationship is the most critical thing we can talk about and the
colleagues here, I am sure, would completely agree with that. But
the only choice is to do more and I would bet that each of these
physicians here see a few more patients each year to be able to
make their practice viable. Not so much as just financial reward,
but just to make it a viable business that employees will be able
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to count on and you want income, but the patient will be left on
the sideline.
Mr. TIPTON. You just mentioned doctor-patient relationship. We
should not be getting between that, but if there is going to be a
medical decision that is to be made, let us have the family patient
doctor do that in the doctors office. Do you have some concern
about the IPAB Board?
Mr. SMITH. Well, yes, to answer your question. We have seen this
in other countries. We have seen some of the impact it has had.
I saw recently in Europe where epidural injections were taken off
the list of care to be provided, other decisions that are being made,
but in each of these decisions that you see along the way, the majority of these decisions are made without physicians involved. We
speak to thousands of physicians on a monthly basis, and I have
yet to find any of the ones that had the lab coat that were on the
front line during these conversations. But anything we can do, it
has to come down to the physician-patient relationship.
Mr. TIPTON. Dr. Yasso, I saw your head nodding. Would you like
to make a comment on that?
Mr. YASSO. I would agree and the American Osteopathic Association adamantly opposes the IPAB. We think that is just wrongheaded for no other way to say it.
The other thing that is concerning to me in regards to Medicare,
as Mr. Smith said, you are almost getting to a point where you are
just barely breaking even as far as reimbursement is concerned.
What happens in the next 10 years when they cut $500 billion out
of Medicare because of ACA? Does anybody know? I mean, obviously, reimbursement is going to take a hit. It has to take a hit.
I do not see how else you are going to reach that number.
Mr. TIPTON. Excellent point, and Dr. McIntyre, maybe you would
like to jump in a little bit on this because I think Mr. Smith said
it very well. We can insure everyone in the country, but there is
a quantitative difference between insure and health care. Two completely different things. And if we are wanting to be able to get at
health care, are you seeing a real problem with the presidents
health care mandate when it gets down to actual delivery of health
care?
And I am speaking primarily for rural America, rural Colorado.
I know some of our metropolitan areas have an abundance of doctors and specialties, but let us talk about rural America.
Mr. MCINTYRE. I do not know that a mandate in itself creates an
access issue. I think the access issue is really driven more by reimbursement level. So, if your reimbursement level falls below the
level of your ability to deliver the care
Mr. TIPTON. But the reimbursement level is actually via the
mandate. That is part of the program.
Mr. MCINTYRE. Well, my understanding of the ACA is that it
does cut $500 billion out of Medicare
Mr. TIPTON. Five hundred seventy-five billion.
Mr. MCINTYRE. Over 10 years and does fail to correct the SGR,
which is another $300 billion. So, I think that is the access issue.
I think I certainly have a philosophical and constitutional issue
with the mandate myself personally, but, perhaps, I am not sophisticated enough to realize how it will impact access other than the
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issues we spoke of. It is possible to provide someone with insurance, but if that insurance does not pay costs, then you are basically uninsured.
For example, if you put people on Medicaid, I think it is something like 40 percent of all physicians will not accept the Medicaid
patient because the reimbursement is so low and I believe my understanding of the ACA is that by 2019, Medicare rates will be
around what Medicaid reimbursements are now. So, I think that
is a huge issue and a potentially devastating one for access to care
for Medicare patients going forward.
Mr. TIPTON. So, effectively, our senior citizens, people who have
run the race are walking in the door with their Medicaid card, putting it on the table, it is insurance and they are not able to get a
doctor.
Mr. MCINTYRE. I think you could definitely see that problem.
Mr. TIPTON. That is a real challenge.
Mr. Smith.
Mr. SMITH. To add to it, one of the things that my firm does, we
do studies on wait times. How long does it take to get to see a physician? An unintended outcome that we discovered was the greatest
increase in wait times of any metropolitan market was Boston and
the difference between what occurred between our first wait time
survey and our second was the implementation of universal health
care.
So, a place that I think any of our colleagues would probably
have the most physicians, the most training programs, the environment you would not expect to have that issue are having that
issue. So, if that is happening in Boston, what is going to happen?
I do not think that is a difficult question to ask.
Mr. TIPTON. Right.
Dr. McIntyre, maybe if you would like to, we have got to be able
to address some of the accessibility. Every American, I think that
we can all agree, we want affordability, accessibility. The presidents health care mandate fails on both accounts.
What can we do? What should be done to be able to increase the
number of physicians that are going to be able to get into some of
these rural areas to be able to provide that access to health care?
Mr. MCINTYRE. In answering a similar question, I thought perhaps injecting a market-based solution to this problem would go a
long way to improving quality, decreasing costs, and improving access. I think if the patients have some skin in the game, then they
are more likely to seek health care that is of quality to them. If
somebody is paying for their health care, especially if it is first dollar coverage, they are less likely to become shoppers, they are less
likely to search for quality. They are much more likely to search
for volume.
So, I think in the current situation, we have a volume-driven
process that is going to be exacerbated by the health care law instead of one where we will be looking for quality.
The health care law does attempt to impose quality on the system through comparative effectiveness research and on other
things, but that is sort of a top-down approach.
Mr. TIPTON. Ultimately, and I would just kind of like to get your
thoughts on this, original CBO estimates on the presidents health
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care mandate stated it was going to cost $900 billion. In the White
House, there was dancing in the hallways over that number. I am
a small business guy and I know $1 billion is a lot of money. CBO
just rescored this. It is going to be $1 trillion and $787 billion. With
administrative costs, we are going over $2 trillion.
Is there a better way to be able to spend $2 trillion?
Mr. KENNETT. Congressman, if I could, I would like to just comment a little bit on before and then this question, as well, and that
is that if we are going to increase access, we have to be able to pay
for it. And, so, that is a concern. We have to appropriately pay physicians for the services they perform. So, if we are going to reduce
costs within the system, I think if you get any larger number of
physicians in a room and talk about how we are going to reduce
costs, that you will come to the issue of utilization.
And, so, the American College of Cardiology for years has been
working on the perfect use criteria and our registries and I think
that we as a profession are going to have to look at the appropriate
utilization and cut out the utilization that is inappropriate and
that could save possibly as much as one-third of what we are
spending right now on health care.
Mr. TIPTON. Would tort reform be a good idea?
Mr. YASSO. Absolutely, and I was going to just mention that. The
patient comes in with back pain, let us say, and you may send
them for X-rays of their back, let us say low back pain. They come
back and they say well, doc, you gave me some medicine, it really
did not help, I still have the back pain. And the next thing you
know, you are ordering an MRI. Why do you do that? Is it because
it is really a necessary test or is it because you are worried about
the liability of the situation? Am I missing something? Is there
something else going on here that I will pick up with the MRI? And
you are thinking about the legality of the situation more than you
areis this really appropriate care for the patient? And medical liability is what is perceived a lot of times and I think that is really
true in the ER setting. You wonder how much money is spent needlessly in the emergency room on CTs of the head, stress tests for
chest pain, all those kinds of things where they may not necessarily be needed.
Mr. TIPTON. I mean, I thought it was curious that the administration and the 111th Congress, we are in the 112th, would not
even consider tort reform because I have actually held meetings
with physicians. I just met with about 24 physicians over in Brentwood, Colorado. Tort reform came up as one of the number one cost
drivers and it is fear factor that if the patient is not totally forthcoming and you did not catch it, you can be sued. We have got to
be able to bring some common sense into that portion of the equation, as well. So, certainly thank our panel for taking the time to
be able to be here. We would love to be able to hear more from you.
This is about affordability, it is about accessibility, and as I travel
through rural Colorado in my district, I am talking senior citizens
right now who are frightened about what the consequences are
going to be to their health care going forward as we continue to see
the presidents health care mandate put into place and I think
maybe we should have started with you at the very beginning, talk
to the physicians before they started writing a 2,000-plus-page bill
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that many of them did not read, yet passed, and Minority Leader
Pelosi was correct. She said we will find out what is in it once it
has passed, and, unfortunately, that discovery is still continuing.
We are seeing increased costs, increased control, and reduced access to health care in this country. Thank you for coming in today.
I yield back, Mr. Chairman.
Chairman COFFMAN. Thank you, Mr. Tipton. I have got a few
other questions. I want to make sure that we have everything done
on record.
Dr. Yasso and Dr. Kennett, in your written testimony, you both
mentioned a burden of complying with statutory and regulatory requirements, particularly electronic health records, electronic prescribing, and physician quality of reporting, which will carry significant penalties for non-compliance in future years.
Would you elaborate on how these burdens disproportionately
impact a small or solo practice physicians time and revenue?
Mr. YASSO. I have a friend that practices in Kansas City and has
a predominately Medicaid practice. She has chosen to date not to
implement the electronic health record because of the expense. I
mean, she is barely breaking even paying her help, taking a salary,
and those types of things and she is a very altruistic person and
she wants to take care of her patient population, but she cannot
affordand even though the government says well, we will reimburse you if you put in a system that is compatible or I forget what
the terminology is for that, but, anyway, she has made the decision
that in 2014, she is going to retire. And the community is going to
lose one darn good doctor because of that. And it is those types of
things. It is just a heavy burden in situations like that and it takes
good people out of the practice of medicine.
Mr. KENNETT. With our group of physicians, there were only 11
at the time, we spent about $700,000 on electronic health record
and you do not recoup very much. On an ongoing basis, you had
that expense of maintaining it on a regular basis and the other bad
part of that, when you first institute an electronic health record,
actually it reduces your productivity pretty dramatically for the
first six months or so and then you come back, but you are never
going to get back to where you were before.
So, you are going to have to have electronic health record to demonstrate meaningful use, and if you do not, you get penalized for
all your Medicare, funds will be cutyou are not participating in
meaningful use and you are not e-prescribing, and it goes on and
on. So, that is one of the drivers to hospitals is because the hospital
can better affordthey still had to lower costs involved, yet they
can better afford to absorb those costs in the small physician practices.
Chairman COFFMAN. Mr. Smith, your testimony mentioned the
high cost of malpractice insurance. Do you think malpractice reform will help a small practice physician to shoulder the burden
and how so?
Mr. SMITH. Well, I think if tort reform would be part of the legislation, you would have seen a much greater acceptance of the physicians of this legislation, of the changes that were coming, but we
have seen in states that apply tort reform, that it is a significant
cost savings to the physicians and, of course, what I mentioned be-
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fore, the cost of defensive medicine, which is an intangible cost that
is significant, would be impacted, as well.
Chairman COFFMAN. Dr. McIntyre, some health care mandates,
such as the reporting requirements for health information technology and establishing Accountable Care Organizations are first
instituting with incentive payments, but involved penalties later.
Do you think that the inability to comply with mandates may be
contributing to the disappearance of small medical practice?
Mr. MCINTYRE. The short answer is yes. We implemented an
electronic medical record in 2002. So, we were early adopters. Totally, we spent $500,000, which was about $100,000 per doctor. We
initially saw some savings because we were able to get rid of file
clerks and paper costs and transcription costs, but going forward
with upgrades and having to hire new staff to enter data, those
cost savings went away. So, basically, its a huge cost for a small
business. The HITECH Act leaves physicians $44,000 over 5 years
to implement a record as long as they comply with meaningful use.
So, that would not even cover half of our investment per doctor.
In addition, the quality reporting in much of the act is very difficult to comply with because the quality reporting criteria have
been developed by National Quality Forum and places like that of
the I think it is 44 quality measures, only 3 of them apply to orthopedics at all. So, we were trying to fish around for what we are
going to start reporting on to comply with the mandate. Asking
people about looking at things sometimes had nothing to do with
what they were seeing us for. We have to report those things, even
though they are not in the scope of our practice, just because of the
reporting regulations.
Chairman COFFMAN. Dr. Kennett.
Mr. KENNETT. Chairman Coffman, I will just give you a quick
personal anecdote about tort reforms. Missouri has a tort reform
law with a cap on non-income damages of $350,000. So, my insurance says an interventional cardiologist dropped from $35,000 to
$14,000.
Chairman COFFMAN. Right, okay.
Mr. Tipton.
Mr. TIPTON. Thank you, Mr. Chairman. I just did have one follow-up question.
Dr. McIntyre, you had brought it to mind and it is not in regards
to the electronic medical records, but going back to Medicare, being
able to fill out compliance forms to be able to get paid.
Has it been your experience many in all of your professionsI
talked to a good family practice doc in my hometown, finally just
pretty much quit simply out of frustration from the standpoint that
they had moving bars when it came to being able to fill out the
forms, make sure they filled in the right dots, and it was constantly
changing.
Have you written any analysis in terms of the costs, how much
you were spending rather than spending time with patients, you
are paying people to be filling out more records when it comes to
Medicare?
Mr. MCINTYRE. Well, certainly, our costs in general increased significantly to the point where they were about 80 percent of revenue
for our clinical practice. We had other portions of the practice that
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had a lower overhead figure but even with those figured in, our
total overhead cost was about 63 percent, but that had increased
hugely since the earlier part of the 1990s. We never culled out
Medicare specifically to analyze the cost just for Medicare patients,
but overall, it increased tremendously. When I started, we had one
billing person. When I left, we had six. When I started, we had one
person to do pre-certifications and things like that. When we sold
the practice, we had one person per physician. So, all these things
added up over time.
Mr. TIPTON. I am sorry, I apologize for interrupting, but just so
that I am clear on that, you did not mean you were seeing more
patients, that you were putting out more bills, it was just compliance?
Mr. MCINTYRE. Right, just compliance, correct.
Mr. TIPTON. Just strictly compliance.
Mr. MCINTYRE. We did have to ramp up volume, too, because we
could not
Mr. TIPTON. Pay for it.
Mr. MCINTYRE. Since we were getting a set fee, the only way
forthere are two ways for a private practice to increase income
in a set-fee market and that is to see more volume or to add ancillary services. You can decrease costs, but the quality of your service suffers to the point where you are not worth going to see.
Chairman COFFMAN. Dr. Kennett.
Mr. KENNETT. Congressman, I would just say that I hope CMS
is not listening or the Department of Justice, but if on a regular
basis a physician actually read all the documents which you are
supposed to sign every day, it would add hours to your day. There
is no way. You have reams of documents that you go through every
day you sign your signature on, whether it is home health or hospice or Medicare documentation, it is huge; there is just no way
you can actually read it all.
Mr. YASSO. When I first started in private practice in 1980, there
were three of us, three physicians, and we had four people working
for us, two in the front office, two in the back, and that was it and
we did just fine. Today, with four providers, three physicians, one
nurse practitioner, we have an office manager, four people working
in the front office, and four people working in the back office. So,
I mean, realizing we have got one more provider than we did 30
years ago, but, still, all this regulation and all the things that we
need to do, the precertification of everything, you just have to have
more bodies. You cannot get by without them.
Mr. TIPTON. It is no consolation, but in this country, businesses
are paying $1 trillion 750 billion per year on just regulatory compliance. Small businesses are paying $10,685 per employee in regulatory compliance. We all know there needs to be some regulations,
but I think we have certainly seen an overreach in the complexity
that is inhibiting the very important work that I know you physicians in particular want to do, and that is to be able to provide
quality health care at an affordable price. So, thank you.
Thank you, Mr. Chairman. I yield back.
Chairman COFFMAN. Thank you.
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Dr. Yasso, I have got a question. Do you think small or solo practices may survive, but only if they fill a particular niche such as
concierge care?
Mr. YASSO. I think that could be the way that this goes. I have
a friend of mine that has started a concierge practice, at least part
of what he does. He does not do 100 percent of that yet, although,
he may very well move into that direction at some point in time.
It is my understanding that you see a lot of that and Mr. Smith
could speak to that, I am sure, on the east and the west coast and
I am sure that eventually, that is going to move towards us. It only
makes sense from the private practitioner if he wants to stay private that he does something like that because now he controls his
income. It is not controlled by the government, it is not controlled
by any regulator, he controls his income and that makes sense.
Mr. SMITH. I would like to just simply with that, because concierge medicine, people think of it as the billionaires medicine, the
doctor follows them around, and that does exist, but if you were a
primary care provider in solo practice, you are going to have three
to four employees, you are going to have 50 to 70 percent overhead
costs, and you are questioning what do you do? Do I join a hospital? If you can today become a concierge physician, you can take
that panel, which could be as low as 2,500, 4,000 patients and if
you had 500 of them agree to pay you $50 a month and you would
see them just in their office and take care of all their needs, you
would make about 20 percent more money than you made the other
way. So, you can survive, but from a small business perspective,
you would trim your staff one or two people. So, very lean and
those are good-paying jobs, jobs that we hear talk about our health
insurance, a big part of the opportunity, but these are smart individuals, they will find a way to adapt and coming off the grid and
doing that is one way.
And the second thing I would keep in mind is what if you are
not one of the 2,500 that can afford the $50 a month? So, we have
taken that FTE from a full position down to about 15 to 20 percent
of an FTE and in environment we already have a supply challenge.
Chairman COFFMAN. My final question involves seniors, seniors
on Medicare, seniors in my district and across the country. And
seniors on basic Medicare had a very challenging time, an increasingly difficult time finding physicians that will see them and with
the Independent Payment Advisory Board that will be fully online
I think in 2015 according to the Affordable Care Act, is that not
going to make this situation all that much worse when the new
way of controlling spending is to have this 15-member board control spending through restricting reimbursement levels. It seems
essential, that is how we are controlling spending in the Medicare
system. And, so, I wondered if any of you have any comments on
where you see senior care going under Medicare.
Mr. MCINTYRE. In addition, I believe that the IPAB not only is
tasked with cutting costs significantly, but also with maintaining
access at the same time. So, I do not know how they can do that.
And I do not know how central planning is going to be able to affect a fair reduction or program, especially without any input from
anyone. I believe there is no input from physicians, there is no
input from the Congress, they basically just give Congress a report
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and Congress can accept it or not. Currently, at least now, we have

some input to our reimbursement via some certain committees of
the AMA. That will go away with the IPAB.
Mr. KENNETT. Certainly, the environment we are in where there
is uncertainty on Medicare reimbursement, seniors are going to
have increasing difficulty getting access, you are exactly right. I
think we all here could agree that the IPAB is not a good thing
and it is really not a good thing and that the only people that they
are going to cut between now and 2019 are providers.
And, so, the good news is I think that the current congressional
environment, it seems very unlikely you are going to get 15 people
to approve by the Senate to be on the board, so, it is not going to
be implemented.
Mr. SMITH. And I would argue that they are regulating and controlling prices for services in largebecause they cannot get access.
Chairman COFFMAN. Did anyone have any further comments?
Well, thank you, all, for participating today. I ask unanimous
consent that the following articles be admitted to the hearing
record. A New York Times article dated March 25, 2012, entitled
More Doctors Giving Up Private Practices, a CNNMoney article
dated July 11, 2012, entitled The Mind of a Solo Doctor, a Wall
Street op-ed dated July 5, 2012, entitled Obama Cares Lost Tribe:
Doctors, a Forbes article dated July 2, 2012, entitled So Long
Marcus Welby: Obama Care, Market Kill the Solo Private Practice.
Without objection, so ordered. I ask unanimous consent that
members submit statements and supporting materials for the
record. Without objection, so ordered.
This hearing is now adjourned. Thank you very much for your
testimony.
[Whereupon, at 11:33 a.m., the Subcommittee was adjourned.]
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House Hearing, 112TH Congress - Healthcare Realignment and Regulation: The Demise of Small and Solo Practices?

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House Hearing, 112TH Congress - Healthcare Realignment and Regulation: The Demise of Small and Solo Practices?

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HEALTHCARE REALIGNMENT AND REGULATION:

THE DEMISE OF SMALL AND SOLO PRACTICES?

SUBCOMMITTEE ON INVESTIGATIONS, OVERSIGHT,

COMMITTEE ON SMALL BUSINESS

Small Business Committee Document Number 112080

U.S. GOVERNMENT PRINTING OFFICE

For sale by the Superintendent of Documents, U.S. Government Printing Office

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HOUSE COMMITTEE ON SMALL BUSINESS

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LORI SALLEY, Staff Director

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Hon. Mike Coffman ..................................................................................................

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THURSDAY, JULY 19, 2012

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STATEMENT OF MARK SMITH

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STATEMENT OF LOUIS F. MCINTYRE

Mr. MCINTYRE. Thank you, Mr. Chairman and members of the

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STATEMENT OF JOSEPH YASSO

Mr. YASSO. Thank you. Chairman Coffman, Ranking Member

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STATEMENT OF JERRY KENNETT

Mr. KENNETT. Good morning. Thank you, Member Schrader and

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